Canceling buying and selling homes

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Canceling buying and selling homes

We are in the process of selling our home and purchasing another. Our buyers were supposed to close on our existing home on or before today’s date but keep moving the closing. We are now having to change the date on the house we are buying and we are going to loose all of the contractors we scheduled – painters, movers, electrician…etc. We are fed up and want to cancel both deals. What might the penalties be?

Asked on November 15, 2017 under Real Estate Law, Michigan

Answers:

SJZ, Member, New York Bar / FreeAdvice Contributing Attorney

Answered 3 years ago | Contributor

Courts are usually oddly reluctant to allow the termination of  a real estate purchase due to a missed closing date, probably because they are complex transactions in which delayed or changed closing dates are not uncommon. However, you can greatly enhance your chance of being able to successfully terminate the deal without penalty if you send the buyers a "time is of the essence letter."
Draft a letter that, in a very professional way, lays out the history of changed or missed dates; states the types of costs this is causing you; which proposes a new date (or restates the one you and they have currently agreed to); and which states that "time is of the essence" and that if they do not close on that date, they will be in breach and the contract will be terminated by their breach. Send it some way or ways you can prove delivery (e.g. FedEx with tracking; certified mail; etc.) If you do this and they miss another date, you should be on much firmer ground to cancel the deal and keep any deposit; they will have had clear warning of the consequences for missing another date, and that demand will be backed up by the facts of the situation, showing you are not being unreasonable (i.e. it will look better to a court, if litigation ever ensues).
The reason why you want to make sure you have a strong case is that if you don't and the buyer sues you and wins, they could potentially get a court order requring that the sale go through--and/or get monetary compensation for potentially large costs they might incur (like weeks or months in a hotel, if they are left without somewhere to live).


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